The US dollar is poised for its first weekly decline in over a month against the euro and yen, as investors shift focus to the Federal Reserve's rate outlook and ease concerns over the Iran conflict. The selloff in AI stocks this week has rippled into the credit market, raising doubts about the profitability of data center operators and their ability to service debts.
Analysts suggest Wednesday's market movements offer a glimpse into how currencies might react to a broader AI-driven selloff. Contrary to expectations, the dollar weakened rather than gaining safe-haven demand, as investors adopted a more dovish view of the Federal Reserve's policy path. The Swiss franc emerged as a key beneficiary, set for a 0.61% weekly rise against the dollar, buoyed by its safe-haven status and expectations that Switzerland will maintain its current zero policy rate.
The dollar index, tracking the US currency against six major peers, fell 0.25% to 101.77, on track for a 0.45% weekly drop. Despite a boost from stronger-than-expected inflation data, the dollar's gains were offset by the tech stock selloff. The S&P 500 rebounded on Thursday, recovering from early losses as investors pivoted from AI stocks to healthcare and consumer sectors.
Thierry Wizman, global forex and rates strategist at Macquarie Group, noted that Wednesday's market action highlighted potential threats to the US dollar and bond yields, including reduced AI investment, which could lower bond supply and impair US growth. Meanwhile, the euro rose 0.14% to $1.1235, set for a 0.39% weekly gain, while the yen was on track for a 0.28% weekly rise after four consecutive weeks of declines.